Deep Throat’s Advice in 1972 is Still Valid 40 Years Later:
Why Wall Street Fears the Ancient Law of Eminent Domain in 2012
If you are younger than 45, you will benefit from a refresher course in modern American history—Richard Nixon’s Watergate Scandal, the reason Nixon resigned his Presidency, the only U.S. President ever to resign.
Watch the 1976 movie “All the President’s Men”, starring Robert Redford and Dustin Hoffman. The anonymous informant, code named “Deep Throat”, who helped break Nixon’s Presidency, says:
Deep Throat: Follow the money.
Bob Woodward: What do you mean? Where?
Deep Throat: Oh, I can’t tell you that.
Bob Woodward: But you could tell me that.
Deep Throat: No, I have to do this my way. You tell me what you know, and I’ll confirm. I’ll keep you in the right direction if I can, but that’s all. Just… follow the money.
Flash forward to 2012.
Local governments are considering using the ancient legal power of eminent domain to “condemn” mortgages encumbering “underwater homes”, homes worth less than the mortgage debt.
Why? To remove the anchor of underwater homes that is stalling our economic recovery; this is the “public good” that underpins and legally justifies use of eminent domain.
Hudson Sangree’s article, “Sacramento area officials explore using eminent domain to aid underwater homeowners”, is excellent reading.
Wall Street is freaked out about this idea in a big way, and Wall Street’s reaction is an immediate sign that this eminent domain idea is a good one! Here’s what Wall Street’s fight back reaction was:
“Critics in the mortgage industry say the real motive is money.
Timothy Cameron, an executive with the Securities Industry and Financial Markets Association, called [the] plan a strategy for ‘short-term opportunistic investors to make a 20- to 30-percent profit’ by ‘cherry pick(ing) the best loans out of a securitized pool and buying at a substantial discount.’”
Wall Street’s criticism of the eminent domain plan is just too, too ironic: Wall Street is complaining the real motive behind the plan is to make large, short term profits. Well, “Shame on you!”
Since when is Wall Street against high, short term profits?
Wall Street is saying, in effect, “How dare these people promoting this eminent domain idea wanting to make high, short term profits. Their idea must be bad for the country, for us, bad for Wall Street.”
Check out CNBC’s Maria Bartiromo ranting about how “wrong” it is for eminent domain to be used for principal reductions on underwater home loans.
Maria reportedly makes $1 Million annually, with a net worth of $22 Million. Point: Maria’s objectivity needs to be evaluated against these “facts”. http://www.celebritynetworth.com/richest-businessmen/wall-street/maria-bartiromo-net-worth/
Takeaway: If Wall Street is against an idea, look carefully into the merits of the idea.